Adani Transmission's Q1FY19 results (Underperformer) - Mumbai DISCOM acquisition - awaiting lenders approval
Q1FY19 results
- Adani Transmission reported EBITDA of Rs5.1bn (est of Rs5.1bn), +12% yoy and profit was Rs1.7bn (est of Rs1.5bn), + 101% yoy in Q1FY19. The increase in EBITDA and PAT was on account of favourable tariff order for Mundra Mohindergarh in Q3FY18 (Recurring profit grew by Rs2bn per annum)
- Total capital expenditure under all the tariff based competitive bid (TBCB) projects is Rs40bn. Out of which, Rs30bn has been spent till date (equity of Rs10bn and debt of Rs19.3bn). It has won a new TBCB projects with a cost of Rs18bn during Q1FY19. Adani Transmission has partially commissioned four TBCB projects.
- Acquisition of Mumbai DISCOM asset has received Competition regulator and electricity regulator approval. The acquisition is awaiting lenders’s approval. The deal is likely to be consummated within a month post the lender approval.
- Deal will be funded by debt of Rs85bn and equity of Rs36bn. It has already tied up the debt of Rs85bn with the lenders. Note that Adani Transmission has already paid an advance of Rs26bn to Reliance Infra for the acquisition of Mumbai DiSCOM. Out of Rs26bn, Adani Transmission raised Rs18.5bn of unsecured perpetual securities from the promoters
Key positives: Higher availability of transmission assets; won a new intra state TBCB projects of Ghatampur (cost of Rs18bn); Commissioning of new transmission assets
Key negatives: Expensive acquisition of Reliance Infra Mumbai DISCOM
Impact on financials: We maintain our earnings estimates for FY19E/FY20E
Valuations & view
We expect FY18-20E EBITDA and earnings CAGR to be 33% and 43% respectively, led by favourable order for Tiroda Aurangabad assets, commissioning of new assets, acquisition of assets (including Reliance Infra Mumbai DISCOM) and refinancing-led interest cost savings. Given the rich valuations (20.4x FY20E earnings and 3.2x FY20E book value), we maintain underperformer rating with a TP of Rs113/share (our price factors in new project win of Rs40-50bn per annum, and assumes an attractive return on all assets under acquisition and all bid assets under execution). The key risk to our call is ATL winning new transmission bids of large sizes
Adani Transmission Limited. Adani Transmission Limited is a holding company. The Company operates as a power transmission company. It is engaged in transmission of electric energy and trading of castor oil. It owns, operates and maintains approximately 5,050 circuit kilometers of transmission lines, ranging from 400 kilovolts to 765 kilovolts, with a total transformation capacity of over 12,000 megavolt ampere (MVA). The Company has four operational Transmission Systems that primarily serve the Northern and Western regions of India, and additional projects of approximately 1,700 circuit kilometers in Rajasthan, Chhattisgarh, Madhya Pradesh and Maharashtra under construction. Its projects under utilities include Mundra-Mohindergarh Transmission Line, Mundra-Dehgam Transmission Line and Tiroda-Warora Transmission Line. Its engineering, procurement and construction projects include Mundra-Zerda Transmission Line, Nalia-Bitta Transmission Line, Kawai-Chhabra Transmission Line and Shantigram-Transmission Network.
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